Question 1

Suppose a consumer is currently spending all of her available income on two goods: music CDs and DVDs. If the price of a CD is $9, the price of a DVD is $18, and she is currently consuming 10 CDs and 5 DVDs, what is the consumer's income?
A)$90
B)$180
C)$270
D)$360

Accepted Answer

The consumer's total spending on CDs is 10 x $9 = $90 
The consumer's total spending on DVDs is 5 x $18 = $90 
Therefore, the consumer's total spending is $180 
If we let the consumer's income be represented by Y, then we can set up the following equation: 
10($9) + 5($18) = Y 
Simplifying, we get: 
$90 + $90 = Y 
$180 = Y 
Therefore, the consumer's income is $180. 
The best choice is B because it is the only option that correctly calculates the consumer's income based on the given information.

Question 2

Suppose a consumer spends her income on two goods: iTunes music downloads and books. The consumer has $100 to allocate to these two goods, the price of a downloaded song is $1, and the price of a book is $20. What is the maximum number of books the consumer can purchase?
A)100
B)20
C)10
D)5

Accepted Answer

The answer of Suppose a consumer spends her income on...

Question 3

A decrease in income will cause a consumer's budget constraint to
A)shift outward, parallel to its initial position.
B)shift inward, parallel to its initial position.
C)pivot along the horizontal axis.
D)pivot along the vertical axis.

Accepted Answer

A decrease in income will cause a consumer's budget constraint to shift inward, parallel to its initial position. This is because with a decrease in income, the consumer will have less money to spend on goods and services, causing the budget line to move inward.

Question 4

A consumer is currently spending all of her available income on two goods: music CDs and DVDs. At her current consumption bundle, she is spending twice as much on CDs as she is on DVDs. If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs, what is the price of a CD?
A)$4
B)$8
C)$12
D)$20

Accepted Answer

Let P be the price of a DVD.
Then the price of a CD is 2P.
Also, 2P(10) + P(2) = 120.
Therefore, 20P + 2P = 120
Simplifying the above equation, we get P = $8. Thus, the price of a CD is 2P = $16. So, the best choice is B.

Question 5

Suppose a consumer spends her income on two goods: music CDs and DVDs. The consumer has $200 to allocate to these two goods, the price of a CD is $10, and the price of a DVD is $20. What is the maximum number of DVDs the consumer can purchase?
A)10
B)20
C)40
D)50

Accepted Answer

The answer of Suppose a consumer spends her income on...

Question 6

Assume that a college student spends her income on books and pizza. The price of a pizza is $8, and the price of a book is $15. If she has $120 in income, she could choose to consume
A)8 pizzas and 4 books.
B)4 pizzas and 6 books.
C)5 pizzas and 5 books.
D)2 pizzas and 7 books.

Accepted Answer

The answer of Assume that a college student spends her...

Question 7

A family on a trip budgets $1,000 for meals and gasoline. If the price of a meal for the family is $50 and if gasoline costs $3.50 per gallon, then how many meals can the family buy if they buy 100 gallons of gasoline?
A)13
B)16
C)19
D)21

Accepted Answer

The answer of A family on a trip budgets $1,000...

Question 8

If the price of bread is zero and the price of cheese is positive, then the budget constraint between bread (on the horizontal axis) and cheese (on the vertical axis) would
A)be vertical.
B)coincide with the vertical axis.
C)coincide with the horizontal axis.
D)be horizontal.

Accepted Answer

If the price of bread is zero, then the horizontal axis represents the amount of bread a consumer can get for free. The budget constraint would be a straight line along the vertical axis, indicating that the consumer can only purchase cheese with their budget. Therefore, the budget constraint would be horizontal.

Question 9

The slope of the budget constraint is all of the following except
A)the relative price of two goods.
B)the rate at which a consumer can afford to trade one good for another.
C)the marginal rate of substitution.
D)constant.

Accepted Answer

The answer of The slope of the budget constraint is...

Question 10

Suppose a consumer spends her income on two goods: music CDs and DVDs. The price of a CD is $8, and the price of a DVD is $20. If we graph the budget constraint by measuring the quantity of CDs purchased on the vertical axis and the quantity of DVDs on the horizontal axis, what is the slope of the budget constraint?
A)-5.0
B)-2.5
C)-0.4
D)The slope of the budget constraint cannot be determined without knowing the income the consumer has available to spend on the two goods.

Accepted Answer

The slope of the budget constraint is calculated as the ratio of the price of the good on the vertical axis (CDs) to the price of the good on the horizontal axis (DVDs), with a negative sign. Thus, the slope = -($8/$20) = -0.4. However, since the question asks for the slope when CDs are on the vertical axis and DVDs on the horizontal axis, and considering the typical representation of a budget constraint, the correct calculation should consider the negative price ratio of CDs to DVDs, leading to a mistake in the initial explanation. The correct interpretation for the slope, given the prices, should reflect the trade-off between the two goods, indicating how many CDs must be given up to afford an additional DVD, or vice versa. Given the prices, the slope should indeed represent the trade-off rate between CDs and DVDs, which is not directly represented by the options provided, pointing to a misunderstanding in the initial explanation provided. The correct slope, in economic terms, would be the price of CDs divided by the price of DVDs, indicating the rate at which the consumer can substitute DVDs for CDs, but the options given and the explanation do not align with this economic principle correctly. Therefore, the correct answer should reflect the trade-off between CDs and DVDs based on their prices, but a reevaluation of the explanation and the options provided is necessary to accurately determine the slope of the budget constraint.

Question 11

A family on a trip budgets $800 for meals and gasoline. If the price of a meal for the family is $50, how many meals can the family buy if they do not buy any gasoline?
A)8
B)16
C)24
D)32

Accepted Answer

With a budget of $800 and each meal costing $50, the family can buy $800 / $50 = 16 meals.

Question 12

Suppose a consumer spends her income on two goods: music CDs and DVDs. The consumer has $200 to allocate to these two goods, the price of a CD is $10, and the price of a DVD is $20. What is the maximum number of CDs the consumer can purchase?
A)10
B)20
C)40
D)50

Accepted Answer

The consumer's budget is $200, so she can allocate that between CDs and DVDs. Let's assume she spends all her money on CDs. At $10 per CD, she could buy 20 CDs (200/10=20). However, if she spends all her money on DVDs, she can only buy 10 DVDs (200/20=10).

Therefore, to maximize the number of CDs she can purchase while still spending all her money, she should buy as many CDs as possible until she reaches her budget of $200.

In this case, the maximum number of CDs she can purchase is 20, which would cost $200 (20 x $10 = $200). So the best choice would be to buy 20 CDs.

Question 13

A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In addition, suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals. How many meals could the family afford if they gave up two nights in the hotel?
A)1
B)2
C)5
D)8

Accepted Answer

If the family could afford 8 nights in a hotel without buying any meals, their budget for the hotel rooms alone is:

$800 – ($40 x 8) = $480

If they gave up two nights in the hotel, they would save:

$40 x 2 = $80

Their new budget for hotel accommodations would be:

$480 - $80 = $400

If they spend all of their hotel money on meals, they could afford:

$400 ÷ $40 per meal = 10 meals

However, they already have $320 (8 nights x $40 per meal) budgeted for meals. Therefore, they could afford:

$320 ÷ $40 per meal = 8 meals

If they give up two nights at the hotel, they could afford to buy an additional:

10 meals – 8 meals = 2 meals

Therefore, the answer is C) 5.

Question 14

Assume that a college student spends her income on mac-n-cheese and CDs. The price of one box of mac-n-cheese is $1, and the price of one CD is $12. If she has $200 of income, she could choose to consume
A)30 boxes of mac-n-cheese and 12 CDs.
B)40 boxes of mac-n-cheese and 14 CDs.
C)20 boxes of mac-n-cheese and 16 CDs.
D)60 boxes of mac-n-cheese and 12 CDs.

Accepted Answer

The answer of Assume that a college student spends her...

Question 15

An increase in a consumer's income
A)increases the slope of the consumer's budget constraint.
B)has no effect on the slope of the consumer's budget constraint.
C)decreases the slope of the consumer's budget constraint.
D)has no effect on the consumer's budget constraint.

Accepted Answer

The answer of An increase in a consumer's income
A)increases the...

Question 16

A decrease in a consumer's income
A)increases the slope of the consumer's budget constraint.
B)has no effect on the consumer's budget constraint.
C)decreases the slope of the consumer's budget constraint.
D)has no effect on the slope of the consumer's budget constraint.

Accepted Answer

The answer of A decrease in a consumer's income
A)increases the...

Question 17

The slope of the budget constraint is determined by the
A)relative price of the goods measured on the axes.
B)relative price of the goods measured on the axes and the consumer's income.
C)endowment of productive resources.
D)preferences of the consumer.

Accepted Answer

The slope of the budget constraint depends only on the relative price of the goods measured on the axes. The consumer's income affects the position of the budget constraint, but not its slope. The endowment of productive resources and preferences of the consumer do not directly determine the slope of the budget constraint.

Question 18

Suppose a consumer spends his income on CDs and DVDs. If his income decreases, the budget constraint for CDs and DVDs will
A)shift outward, parallel to the original budget constraint.
B)shift inward, parallel to the original budget constraint.
C)rotate outward along the CD axis because he can afford more CDs.
D)rotate outward along the DVD axis because he can afford more DVDs.

Accepted Answer

If the consumer's income decreases, the budget constraint will shift inward because he can now afford fewer CDs and DVDs. This will result in a new budget line that is parallel to the original budget line but is located closer to the origin.

Question 19

A consumer who doesn't spend all of her income
A)would be at a point outside of her budget constraint.
B)would be at a point inside her budget constraint.
C)must not be consuming positive quantities of all goods.
D)must be consuming at a point where her budget constraint touches one of the axes.

Accepted Answer

If a consumer doesn't spend all of her income, then she must be at a point inside her budget constraint. This means that she has not used up all of her income on the goods and services available to her at their current prices, and therefore she could still potentially increase her overall utility by consuming more of one or more of these goods while still staying within her budget constraint.

Question 20

A consumer is currently spending all of her available income on two goods: music CDs and DVDs. At her current consumption bundle, she is spending twice as much on CDs as she is on DVDs. If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs, what is the price of a DVD?
A)$4
B)$8
C)$12
D)$20

Accepted Answer

The answer of A consumer is currently spending all of...

Quiz 21: The Theory of Consumer Choice

Suppose a consumer is currently spending all of her available income on two goods: music CDs and DVDs. If the price of a CD is $9, the price of a DVD is $18, and she is currently consuming 10 CDs and 5 DVDs, what is the consumer's income?

Suppose a consumer spends her income on two goods: iTunes music downloads and books. The consumer has $100 to allocate to these two goods, the price of a downloaded song is $1, and the price of a book is $20. What is the maximum number of books the consumer can purchase?

A decrease in income will cause a consumer's budget constraint to

A consumer is currently spending all of her available income on two goods: music CDs and DVDs. At her current consumption bundle, she is spending twice as much on CDs as she is on DVDs. If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs, what is the price of a CD?

Suppose a consumer spends her income on two goods: music CDs and DVDs. The consumer has $200 to allocate to these two goods, the price of a CD is $10, and the price of a DVD is $20. What is the maximum number of DVDs the consumer can purchase?

Assume that a college student spends her income on books and pizza. The price of a pizza is $8, and the price of a book is $15. If she has $120 in income, she could choose to consume

A family on a trip budgets $1,000 for meals and gasoline. If the price of a meal for the family is $50 and if gasoline costs $3.50 per gallon, then how many meals can the family buy if they buy 100 gallons of gasoline?

If the price of bread is zero and the price of cheese is positive, then the budget constraint between bread (on the horizontal axis) and cheese (on the vertical axis) would

The slope of the budget constraint is all of the following except

A family on a trip budgets $800 for meals and gasoline. If the price of a meal for the family is $50, how many meals can the family buy if they do not buy any gasoline?

Suppose a consumer spends her income on two goods: music CDs and DVDs. The consumer has $200 to allocate to these two goods, the price of a CD is $10, and the price of a DVD is $20. What is the maximum number of CDs the consumer can purchase?

A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In addition, suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals. How many meals could the family afford if they gave up two nights in the hotel?

Assume that a college student spends her income on mac-n-cheese and CDs. The price of one box of mac-n-cheese is $1, and the price of one CD is $12. If she has $200 of income, she could choose to consume

An increase in a consumer's income

A decrease in a consumer's income

The slope of the budget constraint is determined by the

Suppose a consumer spends his income on CDs and DVDs. If his income decreases, the budget constraint for CDs and DVDs will

A consumer who doesn't spend all of her income

A consumer is currently spending all of her available income on two goods: music CDs and DVDs. At her current consumption bundle, she is spending twice as much on CDs as she is on DVDs. If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs, what is the price of a DVD?